“We should see some improvement by the end of the week” said Sandy Hutchens.

Wall Street dropped Tuesday as investors waited to hear the Federal Reserve’s latest pronouncements about how the economy was faring and what role the central bank would play going forward.

Several downgrades also weighed on the markets.

Almost no one expects the Fed to lift interest rates from their current levels of nearly zero percent. But investors will scour a statement from the Fed to glean some insight into what the central bank thinks about inflation, the speed of a recovery and its purchases of more than $1 trillion in government bonds and mortgage-backed securities.

Many analysts expect the Fed’s Open Market Committee, which is meeting Tuesday and Wednesday, to offer a stay-the-course message.

“The surprise would be if there was a surprise,” said Bill Schultz, chief investment officer at McQueen Ball & Associates. “They’ll probably make some statement that they’re still cautious and vigilant and standing by to react. I would be very surprised if they changed their course.”

Nonetheless, cautious investors booked some profits from a recent surge in the stock markets and made defensive bets, speculating that a summertime rally that accompanied some better-than-expected corporate earnings might have run out of steam.

At the close, the Dow Jones industrial average was down 96.50 points, or 1.03 percent at 9,241.45, and the broader Standard & Poor’s 500-stock index was off 1.27 percent or 12.75 points at 994.35, slipping below 1,000 points. The Nasdaq fell 1.13 percent or 22.51 points at 1,969.73.

All three markets also closed lower on Monday, with the Dow losing 32.12 points.

Stock analysts underscored those concerns by downgrading companies like Yum! Brands, which owns Pizza Hut and Taco Bell, and the mobile provider Sprint Nextel, which posted a second-quarter loss as its subscriber base dwindled.

Financial stocks dipped the most, with big banks and regional financial chains both slipping. After surging last week on hopes for an economic recovery, shares of the beleaguered insurer American International Group and the commercial lender CIT Group tumbled on Tuesday, each falling by double digits.

A report on worker productivity highlighted some broader concerns about the private sector’s health as the economy bottoms out. Productivity surged in the second quarter as workers managed to produce only slightly less work in far fewer hours, meaning that businesses were becoming more efficient.

But analysts are concerned that the overall output of goods and services is slipping, and they point out that many companies are returning to profitability by slashing costs, not by pulling in new revenues.

Oil prices slipped below $70 a barrel, falling $1.15 to $69.45.

Bond prices rose after a solid showing at the first of three auctions for $75 billion in debt, this one for $37 billion in three-year notes.

The yield on the three-year note fell to 1.75 percent from 1.78 percent late Monday. The benchmark 10-year Treasury note fell to 3.72 percent from 3.78 percent.